Questions tagged [modelling]

Suppose a stock $S$ follows
$$dS(t) = \alpha(t)S(t)dt + \sigma(t)S(t)dW(t),$$
where $W(t)$ is a Brownian motion under $P$. Also suppose there is a short rate process $r(t)$. My question would be is ...

I am trying to approximate the returns of asset A by means of a linear combination of other assets A'=aB0+bB1+c*B2....
I have this quite figured out but I'm not sure what a good metric for goodness ...

From Jacod and Shiryaev's Limit Theorems for Stochastic Processes, we get the following definitions.
Definitions:
A process with independent increments (abbreviated PII) $X = (X_t)_{t \geq 0}$ on a ...

Let's say I model a 6M forward Libor rate as a process $(L^1_t)_t$ that's a diffusion, with in view a Monte-Carlo (MC) pricing of some product. At some point I will have real life dates $T_i$'s that I ...

I've come across the term regime switch in volatilities when reading about the modelling of interest rates but could not find a definition for a regime switch and what a regime is.
Can somebody give ...

For the purpose of getting fatter tails than the Guassian, I have seen people for example use $\alpha$-stable processes to model the stock. But in that case they end up using 'tempered' versions of ...

I am a bit confused about the formulation of the EGARCH(1,1) model.
First, we have the error term: $\epsilon_t=\sigma_t*\zeta_t$, where $\zeta_t$ is white noise.
Now the EGARCH(1,1) should be:
$$
log(...

I have 1 dependent variable and 3 independent variables.
I run multiple regression, and find that the p value for one of the independent variables is higher than 0.05 (95% is my confidence level).
I ...

In the process of my research I very often come across academic papers regarding modelling and trading strategies that in one way or another incorporate some technical indicators. For example in some ...